5 ms·

The Chicago pension fund didn't think a VIE was actually ownership, right? Turns out the thing uses to circumvent capital controls was actually illegal, whoops.

refurb 5y ago
Ha, it’s funny cause it’s true. The risk was always there. The pension fund can’t play dumb. My only question is China apparently doesn’t think it need foreign investment any more? I mean this latest move will scare a lot of foreign investment away (“that’s a nice valuation you have, would be a shame if we made all for-profit companies illegal”). No doubt the Chinese are smart enough to know this so I assume they have enough domestic wealth to supply any capital needs? Still, scaring off the international markets seems like a bad move.
- refenestrator 5y ago
  China never wanted foreign investment/ownership of their tech companies, that's why this cockamamie scheme with an associated service company listed in NY arose in the first place.
- ralph84 5y ago
  > My only question is China apparently doesn’t think it need foreign investment any more? China hasn't really needed more foreign investment for quite a while. They get plenty of foreign capital from international trade. What they needed was foreign IP, which they acquired by forcing foreign companies into joint ventures if they wanted access to the Chinese market. Not to mention state-sponsored industrial espionage. At this point it's safe for any foreign investor to assume that any investment proposal in China that doesn't involve the transfer of IP to China is a scam.
refenestrator 5y ago
Reminds me of the people who got mad about the auto bailouts in 08 because the junk bonds they were holding didn't pay out. You bought the bonds! This is on you!
- nradov 5y ago
  Investors were mad because the auto industry bailouts abrogated normal bankruptcy rules about creditor seniority and gave sweetheart deals to politically favored unions. The federal government changed the rules in the middle of the game.
- opo 5y ago
  People were upset because of how the secured debt was treated Some analysis here: >...Secured debt takes first priority in payment; it is also typically preserved during bankruptcy under what is referred to as the "absolute priority" rule — since the lender of secured debt offers a loan to a troubled borrower only because he is guaranteed first repayment when the loan is up. In the Chrysler case, however, creditors who held the company's secured bonds were steamrolled into accepting 29 cents on the dollar for their loans. Meanwhile, the underfunded pension plans of the United Auto Workers — unsecured creditors, but possessed of better political connections — received more than 40 cents on the dollar. >Moreover, in a typical bankruptcy case in which a secured creditor is not paid in full, he is entitled to a "deficiency claim" — the terms of which keep the bankrupt company liable for a portion of the unpaid debt. In both the Chrysler and GM bankruptcies, however, no deficiency claims were awarded to the wronged creditors. Were bankruptcy experts to comb through American history, they would be hard-pressed to identify any bankruptcy case with similar terms. . https://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law https://www.nationalaffairs.com/publications/detail/the-auto...
  - refenestrator 5y ago
    Another way of describing that story is they held the bonds into bankruptcy and didn't come out on top of the legal/political battle. This battle was always going to happen! They just thought they had the better legal arrangement and would instead stick it to the pensioners. I have no sympathy.
    - gruez 5y ago
      >They just thought they had the better legal arrangement and would instead stick it to the pensioners. I have no sympathy No sympathy why? Because they're greedy investors and on the other side are hard working honest pensioners?

refurb 5y ago

Ha, it’s funny cause it’s true. The risk was always there. The pension fund can’t play dumb. My only question is China apparently doesn’t think it need foreign investment any more? I mean this latest move will scare a lot of foreign investment away (“that’s a nice valuation you have, would be a shame if we made all for-profit companies illegal”). No doubt the Chinese are smart enough to know this so I assume they have enough domestic wealth to supply any capital needs? Still, scaring off the international markets seems like a bad move.

refenestrator 5y ago
China never wanted foreign investment/ownership of their tech companies, that's why this cockamamie scheme with an associated service company listed in NY arose in the first place.
ralph84 5y ago
> My only question is China apparently doesn’t think it need foreign investment any more? China hasn't really needed more foreign investment for quite a while. They get plenty of foreign capital from international trade. What they needed was foreign IP, which they acquired by forcing foreign companies into joint ventures if they wanted access to the Chinese market. Not to mention state-sponsored industrial espionage. At this point it's safe for any foreign investor to assume that any investment proposal in China that doesn't involve the transfer of IP to China is a scam.

refenestrator 5y ago

Reminds me of the people who got mad about the auto bailouts in 08 because the junk bonds they were holding didn't pay out. You bought the bonds! This is on you!

nradov 5y ago
Investors were mad because the auto industry bailouts abrogated normal bankruptcy rules about creditor seniority and gave sweetheart deals to politically favored unions. The federal government changed the rules in the middle of the game.
opo 5y ago
People were upset because of how the secured debt was treated Some analysis here: >...Secured debt takes first priority in payment; it is also typically preserved during bankruptcy under what is referred to as the "absolute priority" rule — since the lender of secured debt offers a loan to a troubled borrower only because he is guaranteed first repayment when the loan is up. In the Chrysler case, however, creditors who held the company's secured bonds were steamrolled into accepting 29 cents on the dollar for their loans. Meanwhile, the underfunded pension plans of the United Auto Workers — unsecured creditors, but possessed of better political connections — received more than 40 cents on the dollar. >Moreover, in a typical bankruptcy case in which a secured creditor is not paid in full, he is entitled to a "deficiency claim" — the terms of which keep the bankrupt company liable for a portion of the unpaid debt. In both the Chrysler and GM bankruptcies, however, no deficiency claims were awarded to the wronged creditors. Were bankruptcy experts to comb through American history, they would be hard-pressed to identify any bankruptcy case with similar terms. . https://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law https://www.nationalaffairs.com/publications/detail/the-auto...
- refenestrator 5y ago
  Another way of describing that story is they held the bonds into bankruptcy and didn't come out on top of the legal/political battle. This battle was always going to happen! They just thought they had the better legal arrangement and would instead stick it to the pensioners. I have no sympathy.
  - gruez 5y ago
    >They just thought they had the better legal arrangement and would instead stick it to the pensioners. I have no sympathy No sympathy why? Because they're greedy investors and on the other side are hard working honest pensioners?